Tony Robinson’s nicely timed election proposal to ban ‘price-plus’ advertising cajoles purchasers into believing real steps are being made in their favour. However, no matter what Consumer Affairs Victoria (CAV) proposes, they cannot manipulate a selling agent to assist a prospective purchaser.
BY CATHERINE CASHMORE
Selling agents are contractually obliged to work in the best interests of the vendor. The vendor is paying the selling agent to get a premium price for their property and whilst they won’t go out of their way to openly mislead a buyer, any advice relating to the likely sale price will be bias towards the vendor and conservative at best. In an auction campaign, quotes are nearly always below ‘expectation’ – this is no different to any other commercially advertised auction campaign. The alternative would be starting with the highest price and working down until a purchaser agrees! Furthermore, what Tony Robinson doesn’t explain, is that while $700,000-plus is no longer okay, $700,000-$900,000 is!
It’s a near impossible task to attempt to regulate the real estate sales industry to quote fairly for both vendor and purchaser. Rightly or wrongly, agents use a number of varied quoting methods to ‘condition’ expectation. In November 2007, following a series of public complaints, consumer affairs attempted to uniform the system with a list of advertising ‘guidelines’ sent out to every real estate agency in Victoria. Certain practices were “not supported by the CAV”. These included terms such as ‘price-plus’ (+), ‘over’, ‘in excess of’ (>), ‘from’, ‘quoting’, ‘greater than’, ‘expect over’, and ‘offers invited’. Three years later and all terms are still widely used and there has been no move to enforce any one system.
Quoting ‘low’ – whilst unfair – isn’t officially underquoting. Pricing property isn’t an exact equation. When a sales agent lists a property for sale they draw a fine line between market expertise – ‘broadly’ based on comparable sales – and personal opinion. The exact requirements by law are minimal. According to the Estate Agents Act the agent is required to write an estimate of likely sale price on the sales authority. This can either be a single price, or 10 per cent price range. This range doesn’t have to be the ‘vendors asking price’ or in instances where the vendors asking price is unknown, reflective thereof.
If an agent advertises the property under the bottom number of the estimated price range, it’s regarded as ‘underquoting’. However, the agents price quote is a conservative appraisal of what the property can easily and comfortably achieve, not a ‘guesstimate’ of what buyers might pay in the heat of an auction, or the vendor’s ‘wish’ price.
Some agents and buyers have advocated quoting the vendor’s reserve, falsely thinking it levels the playing field. However, in many cases the reserve isn’t decided until the end of a sales campaign and also subject to change at any point during.
Therefore it’s not a realistic solution and neither would it be a just system to impose upon the vendor.
Whilst I’m in full agreement of fair legislation outlawing deceitful advertising, and agree that ‘price-plus’ advertising is a ‘wishy-washy’ guideline. Buyers should not be misled into believing this will change the sales process to work in their favour.
Mr Robinson rightly states that:
“Buying a home is the most important investment most Victorian families will ever make. (The Brumby Government) understands the pressures on homebuyers, and that is why we are taking action to give Victorian families more certainty when they’re looking to buy a house.”
Real Estate Institute of Victoria president John Grabyn said the ban would make it “simpler for consumers and bring some consistency into property advertising” reportedly stating it would be “easier for consumers to compare properties for sale and help alleviate confusion.”
However perhaps they can explain how restricting one way of ‘artful’ quoting is going to achieve any of the above? Better advice would be to ignore the price quotes all together, or at least enforce the previous ‘guidelines’ proposed in November 2007.
Becoming an expert in property is not a fly-by-night process. It takes time, education and professional and personal experience. Walking through open for inspections, following auction campaigns, and monitoring sales prices are just a small part of the process. Nearly every person who sells property in Victoria uses a sales agent. They pay roughly 2.5 per cent of the sale price to employ a professional ‘expert’ to market, assess and negotiate the property. Most understand this is the best way to achieve the ‘highest possible price’. A licensed independent buyers advocate charges roughly half this to find, assess, and negotiate a property for a prospective purchaser. They avoid the usual pit falls purchasers understandably stumble upon smoothing the process and negotiating ‘the lowest possible purchase price’ on behalf of the buyer. Arguably, this is the only way to truly level the playing field.
Catherine Cashmore is a senior property adviser and buyer advocate for JPP Buyer Advocates – the largest dedicated buyer advocacy in Melbourne. With extensive experience in all matters regarding real estate, JPP successfully purchases and negotiates over $100m worth of property each year for clients. http://www.jpp.com.au